Mr. STEVENS:

If my hon. friends will

permit me to say so, if what my hon. friend says is correct I am not trying for a moment to deny it. I would not hesitate to say, "God bless you; you are right." I would not have any objection at all to doing that; I am not objecting particularly, but if I can I should like to be accurate, and I have no knowledge of any such condition having been imposed.

Mr. DONNELLY:

It is a matter of

common knowledge in western Canada that the government had to guarantee the banks in connection with the money loaned the pools, and that before they would give that guarantee they insisted that the pools appoint a satisfactory man to sell this carry-over. Several names were presented from which one was to be chosen. Mr. Brownlee of Alberta was suggested, together with John I. McFarland, and I understood from common report that Mr. Brownlee would not accept. Mr. McFarland did take the position, and it was understood that this was one of the conditions imposed by the government.

Mr. STEVENS:

Let me make it quite clear. Let us assume that this was a condition. I am not objecting to it at all; I am quite willing to accept responsibility for it, but in order to be accurate I must answer my hon. friend from my own memory, and I do not recall any such condition. So far as I am concerned, however, my hon. friend is quite at liberty to take that position if he wishes to do so.

Mr. DONNELLY:

I am just telling the

committee what is common knowledge in western Canada and I claim that my hon.

friend, as Minister of Trade and Commerce, is in charge of this branch and should know what was done in that regard. This is our only opportunity to get that information.

Mr. STEVENS:

My hon. friend is not quite correct there. This guarantee to the banks was dealt with by the cabinet, of course, but it had to be handled through the Department of Finance. I had nothing bo do with that pant of it at all.

Mr. DONNELLY:

That may be quite true, but for all that the Department of Trade and Commerce had to look after the marketing of the wheat. What I should like to impress upon the minister, however, is that John I. McFarland's duty was to sell only the carryover of 1929 and 1930; he has had nothing whatever to do with the pool wheat of 1931 and 1932. Anything Mr. McFarland has done in the wheat market since then has been at the instigation of this government, for whom he went in the market and bought futures or hedges; in any case he speculated in wheat, took a flier in the market. There is no doubt about that. You can call it by whatever name you like, but the ordinary man calls it gambling in wheat. I do not know of any other way to gamble in wheat; you can buy and sell futures or you can buy and sell what are called puts and calls, but that is not the common method. The ordinary way is to buy or sell futures. Not long ago the hon. member for Shelburne-Yarmouth accused the government of gambling in wheat, but according to the government there was no gambling at all; it was an extremely conservative form of doing business.

Mr. VALLANCE:

The Minister of Trade and Commerce was one of the delegates who attended the imperial conference of 1930. With him went the Prime Minister, and the advisers in connection with wheat were John I. McFarland, Doctor Swanson and one of the officials now sitting in front of the minister, Doctor MacGibbon.

Mr. STEVENS:

And Mr. MacPhail, head of the pool.

Mr. VALLANCE:

The minister seems to remember that name well enough. He will remember also that after Mr. McFarland came back from the imperial conference some two weeks elapsed before he took over that position, and I believe it was suggested to him that the government would guarantee the banks only if the pools would accept Mr. McFarland as head of the selling agency. I cannot agree with the hon. member for Willow Bunch, that to-day John I. McFarland is not

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selling for the pool. If the statement of the hon. member for Willow Bunch is wrong I would like the minister or his official, Doctor MacGibbon, to correct it.

Mr. STEVENS:

The situation is this. So far as the handling of physical wheat is concerned, Mr. McFarland acted for the pools for the 1930-31 crop year.

Mr. DONNELLY:

Up to August 31.

Mr. STEVENS:

Yes. There was a carryover at that time. That wheat had to be put on the market in orderly fashion. Had it been put under pressure for liquidation it would have seriously affected the market. So far as I know, the pools at that time broke up through the combined selling agencies. They were now more or less in liquidation in any case; they were in the hands of the banks which were guaranteed by us. Then arose this situation. The pools had to fix their initial price according to their system-we will not bother our heads with just what the price was in different years; it varied and there were some difficulties in that regard. At any rate, they had to pay the initial price. Here again the pools had to go to the banks to get funds to pay that initial price and the government had to guarantee the banks against loss in that respect. The pools desired, as had been their custom in the past, to take all the grain offering by the members; that is the service they are supposed to render their members. Now, the wheat came on in the autumn months under a pressure greater than the fixed credit in the bank would permit them to absorb, and if the pools could not carry that wheat themselves, in their own account in the bank, then they had to sell options on the market in order to recoup their credit in the bank. I must differ with the hon. member for Willow Bunch, or whoever it was that said that Mr. McFarland went into the market and drove -the speculator out. That is not the case. With the general world collapse and the falling market in wheat, the speculator, the so-called purchaser of options, disappeared; he disappeared in virtually all markets and there were not sufficient buyers of futures in the market to absorb the offering. We were consequently again confronted with a possible collapse of the market, and it was then that Mr. McFarland was authorized, some months -after the end of the crop year, to stabilize, that is to say, to take up these futures in order that the pools who were hedging on the market against their physical purchases of farmers' grain might be protected in their bank credits. The result of that operation has been an accumulation.

L'Mr. Vallanee.]

My hon. friend from West Edmonton a moment ago made an analysis with which I will not quarrel, but I would invite him and other hon. members to -try' to see all sides of this story. I will not quarrel with him when he says that the holding last year, in so far as it related to last year's crop, was not of great value, but I would ask him to remember this. Had the weight of the physical volume of the wheat been poured upon the market, and if the carry-over of last year, which was 130,000,000 bushels, had not had someone to carry it, someone who could carry it, then the wheat condition would have been worse than it was. That is the point the hon. gentleman overlooked; he did not give due weight to it. Someone who was financially capable of carrying it had to be found, and we alone could. We are carrying it to-day and, I think, successfully, and I hope that we shall be able to liquidate the situation without serious loss ultimately.

Mr. POWER:

I wish to read one order in council dealing with this matter, P.C. 2239, dated September 12, 1931:

The committee of the Privy Council have had before them a report, dated September 11, 1931, from the Minister of Finance, submitting that the economic depression prevalent in Canada, in common with all other countries with which Canada has business relations, is intensified in the provinces of Manitoba, Saskatchewan and Alberta by a partial crop failure, and the difficulty of finding a market for the exportable surplus as rapidly as deliveries are made by the farmer of wheat and other grains grown in the year 1931 in these provinces is apparent. There is need, therefore, if unemployment and distress are not to grow greater, not only in these provinces but elsewhere in Canada, of making immediate provision to enable the farmers in these provinces to sell at market rates or secure reasonable advances upon delivery of their wheat and other grains to the marketing agencies possessing the facilities for marketing the crop. These marketing agencies are:

Manitoba Wheat Pool, wtih its subsidiary, Manitoba Pool Elevators, Limited.

Saskatchewan Cooperative Wheat Producers, Limited with its subsidiary, Saskatchewan Pool Elevators, Limited.

Alberta Wheat Pool, with its subsidiary, Alberta Pool Elevators, Limited; but they, while possessed of a certain amount of cash, do not possess adequate financial resources warranting banking advances that will probably be necessary. Representations have been made by the respective provincial governments. already burdened by obligations arising out of the marketing of the 1929 crop, for assistance from the government of Canada.

The committee, therefore, on the recommendation of the Minister of Finance, advise that repayment of advances made by any chartered bank to any of these marketing agencies, and interest thereon as may be agreed upon between the banks and such marketing agencies in connection with and for the purpose

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of marketing said wheat and other grains, be guaranteed by the governor in council under the authority of the Unemployment and Farm Relief Act, 1931, under the conditions and to the extent hereinafter mentioned, to wit:

Then it refers to each of the wheat pools and goes on:

(d) That security upon the wheat and other

grains be taken by the banks under the

provisions of the Bank Act;

(e) The extent of the guarantee shall be

limited to the maintenance at all times of a fifteen per centum margin in the securities so taken. .

When, in the usual course of accounting and auditing from time to time, it is ascertained that the margin of fifteen per centum is

impaired, the liability under the guarantee of the government to the several banks shall accrue. .

The committee further advise that in the

event of impairment as above set forth further advances, under this guarantee may thereafter be made by the banks, the total not to exceed the respective credits originally established by the banks for the respective marketing agencies unless and until the Minister of Finance makes further arrangements with the banks for additional credits if such be required.

The committee further advise that payment under this guarantee shall be made out of the consolidated revenue fund for the respective balances, if any are owing after the marketing agencies have sold and realized upon all or practically all such wheat and other grains in their possession or control and application of the amounts realized, less expenses, has been made against bank advances and interest, and thereupon the governor in _ council, on the recommendation of the Minister of Finance, shall determine the date at which payments are to be made in pursuance of this guarantee.

That is one order in council. There was another one dated September 28, 1931, and others, a large number of them, down to the latest, April 10, 1933. Now, it is nearly two years since this first order in council was passed and we have never been able to ascertain from the government exactly what the extent of their guarantee was. I do not care whether it was McFarland or anyone else, the government has backed, endorsed and permitted people acting on its behalf to gamble in wheat. It does not matter whether you call it buying hedges or buying futures, they gambled in wheat. They dealt in a commodity they did not have. They bought options for the future delivery of wheat. Very early in his regime the Prime Minister brought Sir Josiah Stamp over from England to find out whether it was moral to deal in futures. I am not sure that at the very time Sir Josiah was investigating this matter the government was not playing the market. I do not know whether the Prime Minister's conscience was bothering him after he started to deal in wheat, but the fact is that an Englishman was brought over here to tell us 53719-253J

that it was permissible and perhaps a good thing to gamble in wheat. I do not think that is sufficient justification for any government to take the money raised by the taxpayers and throw it into the wheat pit like any vulgar speculator. That is what happened.

But there is something still worse than that. Either through incompetency, a lack of the knowledge of finance or for some other reason, we have never been able to find out just where they stand. Many of us gambled in the stock market and we were always able to find out from our brokers just where we stood. We were called for margins upon all occasions and the government must have been called for similar margins. The minister shakes his head but I should like to know if they were not called upon for margins when wheat went to thirty-eight. If they were dealing with brokers and they were not told that their guarantee called for such and such an amount of money, then they had a blanket guarantee. The wheat market is really worse than the stock market as far as gambling is concerned. Lord knows, most of us know how bad the stock market was. We bought Nickel on margin and we bought Auburn automobile, which I consider to be about the worst gamble, on margin, but we knew the condition of our accounts. If rumours are correct this government has been speculating in hundreds of millions of bushels of wheat and they are not able to tell the taxpayers the extent of their gamble. That seems to me to be an unfortunate situation. Apparently there is no accounting to parliament. To the ordinary person who does not know anything about wheat the explanations given as to the wheat pools and Wheat Producers, Limited, and so on are more or less incomprehensible. However, everyone does know that when you play a market, whether it be the stock market, the mining market or the wheat market, you are able to find out whether you are ahead of or behind the game. The taxpayers have never been able to find out from the government just where they stood.

We are told that because of conditions in other countries we may have a win on our gamble, but is -that any justification for the action taken by the government? Any bank clerk absconding with a bank's funds can always say: if -I had continued to gamble I would have been able to make restitution. But that does not save him from criminal prosecution. To-day the minister told us with a certain amount -of pride: we are going to get out and we may make some money. I do not know of any gambleT who does not think the same thing. Everyone in the world

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Who goes into a gamble believes he is going to make some money but that is no justification from the moi'al or economic standpoint. It looks ias though we may make some money out of it because this last order in council says that the governor in council may at any time fix and determine the date at which Wheat Producers shall proceed to sell and dispose of all wheat and other grains in its possession or under its control acquired under the guarantee of the governor in council. There must be a very intimate relationship between Wheat Producers and the government if the government can by order in council older Wheat Producers to sell. If it was an ordinary transaction of guarantee I do not think they would have the right to order them to sell, but here they say by order in council: you must sell. In order te>

be able to do that, Wheat Producers must be the agents of the government. I cannot interpret it in any other way.

Mr. STEVENS:

Is it not reasonable where one party guarantees another that there should be some safeguarding power so that they can at any time force, if you like, the one guaranteed to liquidate?

Mr. POWER:

Surely, and I am not complaining about .that.

Mr. STEVENS:

It is a reserve power.

Mr. POWER:

What we have heard all

through has been the statement that the government are not in the market, that they are merely giving a guarantee; but I am trying to show that if they can give an order to 'their agents to go ahead and sell, they possibly gave .an order to go ahead and buy. If they gave an order to go ahead and buy, it was gambling. I do not see any other interpretation that can possibly be made of this action. If they can tell them they must sell, .they can give them an order to buy. If they gave them an order to buy stuff to be delivered at a future date When they did not know the price, it was gambling.

Mr. DUFF:

Who will get the profit, if

there is any?

Mr. POWER:

I assume the government

will.

Mr. DUFF:

Then they are not guarantors, they are in the deal.